General Instructions

A Change To Note

For 2002, the requirement to avoid the penalty based on your prior year's tax for certain higher income taxpayers is figured using 112% of the tax shown on your 2001 tax return. See Who Must Pay the Underpayment Penalty on this page.

Purpose of Form

Generally, use Form 2210 to see if you owe a penalty for underpaying your estimated tax and, if you do, to figure the amount of the penalty. However, you do not need to file Form 2210 in most cases. The IRS will figure any penalty you owe and send you a bill (see below). File Form 2210 only if one or more of the boxes in Part I of Form 2210 apply to you. If you are not required to file Form 2210, you may use it to figure your penalty if you wish to do so. Enter the penalty on your return, but do not file Form 2210.

The IRS Will Figure the Penalty for You

Because Form 2210 is complicated, we strongly encourage you to let us figure the penalty. If you owe it, we will send you a bill. And as long as you file your return by April 15, 2003, we will not charge you interest on the penalty if you pay by the date specified on the bill.

If you want us to figure the penalty for you, complete your return as usual. Leave the penalty line on your return blank; do not file Form 2210.

See Part I of the form. If any of the boxes on line 1 apply, you must figure the penalty yourself and attach a completed Form 2210 to your return.

Other Methods

We realize that there are different ways to figure the correct penalty. You do not have to use the method prescribed by Form 2210 as long as you enter the correct penalty amount on the penalty line of your return.

However, if you are required to file Form 2210 because one or more of the boxes in Part I applies to you, you must complete certain lines. If you use the short method, you must complete lines 1-19 and enter the penalty on line 22. If you use the regular method, you must complete lines 1-15 and lines 23-31 and enter the penalty on line 36.

Who Must Pay the Underpayment Penalty

In general, you may owe the penalty for 2002 if you did not pay at least the smaller of:

1. 90% of the tax shown on your 2002 tax return or
2. The tax shown on your 2001 tax return (112% of that amount if you are not a farmer or fisherman and your adjusted gross income (AGI) shown on that return is more than $150,000, or, if married filing separately for 2002, more than $75,000).

Note:   In these instructions, return refers to your original return. However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. Also, a joint return that replaces previously filed separate returns is considered the original return.

The penalty is figured separately for each installment due date. Therefore, you may owe the penalty for an earlier due date even if you paid enough tax later to make up the underpayment. This is true even if you are due a refund when you file your tax return. However, you may be able to reduce or eliminate the penalty by using the annualized income installment method. See the Schedule AI instructions beginning on page 4 for details.

Exceptions to the Penalty

You will not have to pay the penalty if either 1 or 2 applies.

1. You had no tax liability for 2001, you were a U.S. citizen or resident for the entire year, and your 2001 tax return was (or would have been had you been required to file) for a full 12 months.
2. The total tax shown on your 2002 return minus the amount of tax you paid through withholding is less than $1,000. To determine whether the total tax is less than $1,000, complete lines 2-13.

Special Rules for Farmers and Fishermen

If you meet both tests 1 and 2 below, you do not owe a penalty for underpaying estimated tax.

1. Your gross income from farming and fishing is at least 2/3 of your annual gross income from all sources for 2001 or 2002.
2. You filed Form 1040 or 1041 and paid the entire tax due by March 3, 2003.

See Pub. 505, Tax Withholding and Estimated Tax, for the definition of gross income from farming and fishing.

If you meet test 1 but not test 2, use Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen, to see if you owe a penalty. If you do not meet test 1, use Form 2210.

Waiver of Penalty

If you have an underpayment on line 19 (line 30 if you use the regular method), all or part of the penalty for that underpayment will be waived if the IRS determines that:

1. In 2001 or 2002, you retired after age 62 or became disabled and your underpayment was due to reasonable cause; or
2. The underpayment was due to a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty.

To request a waiver, do the following.

• Check the box on line 1a.
• Complete Form 2210 through line 21 (line 35 if you use the regular method) without regard to the waiver. Write the amount you want waived in parentheses on the dotted line next to line 22 (line 36 for the regular method). Subtract this amount from the total penalty you figured without regard to the waiver, and enter the result on line 22 (line 36 for the regular method).
• Attach Form 2210 and a statement to your return explaining the reasons you were unable to meet the estimated tax requirements and the time period for which you are requesting a waiver.
• If you are requesting a waiver due to a casualty, disaster, or other unusual circumstance under 2 above, attach documentation such as copies of police and insurance company reports.
• If you are requesting a waiver due to retirement or disability under 1 above, attach documentation that shows your retirement date (and your age on that date) or the date you became disabled.

The IRS will review the information you provide and decide whether to grant your request for a waiver.

Additional Information

See Pub. 505 for more details. It has examples of filled-in Forms 2210.

For guidance on figuring estimated taxes for trusts and certain estates, see Notice 87-32, 1987-1 C.B. 477.

Specific Instructions

Part II - Required Annual Payment

Complete lines 2-15 to figure your required annual payment.

If you file an amended return by the due date of your original return, use the amounts shown on your amended return to figure your underpayment. If you file an amended return after the due date, use the amounts shown on the original return.

Exception.   If you and your spouse file a joint return after the due date to replace previously filed separate returns, use the amounts shown on the joint return to figure your underpayment.

Line 2

Enter the amount from Form 1040, line 55; Form 1040A, line 36; Form 1040NR, line 51; or Form 1040NR-EZ, line 15. For an estate or trust, enter the amount from Form 1041, Schedule G, line 4.

Line 3

Enter the total of the following amounts on line 3.

• Self-employment tax.
• Tax from recapture of investment credit, low-income housing credit, qualified electric vehicle credit, Indian employment credit, or new markets credit.
• Tax on early distributions from
  • an IRA or other qualified retirement plan,
  • an annuity, or
  • a modified endowment contract entered into after June 20, 1988.
• Tax on distributions from a Coverdell education savings account or a qualified tuition program not used for qualified education expenses.
• Tax on Archer MSA distributions not used for qualified medical expenses.
• Section 72(m)(5) penalty tax.
• Tax on golden parachute payments.
• Advance earned income credit payments.
• Tax on accumulation distribution of trusts.
• Interest due under sections 453(l)(3) and 453A(c) on certain installment sales of property.
• An increase or decrease in tax as a shareholder in a qualified electing fund.
• Tax on electing small business trusts included on Form 1041, Schedule G, line 7.
• Tax on income not effectively connected with the U.S. from Form 1040NR, lines 52 and 55.
• Household employment taxes (before subtracting advance EIC payments made to your employees; also see the instructions for line 17 or line 24). But do not include that amount if you do not have an amount on Form 2210, line 12, and the amount on Form 2210, line 10 (excluding household employment taxes) is less than $1,000. If so, do not file this form; you do not owe the penalty.

Line 12

Enter the taxes withheld from Form 1040, lines 62 and 65; Form 1040A, line 39 (and any excess social security and tier 1 railroad retirement tax withheld included on line 43); Form 1040NR, lines 58, 60, 66, and 67; or Form 1040NR-EZ, line 18. For an estate or trust, enter the amount from Form 1041, line 24e.

Line 14

Figure your 2001 tax using the taxes and credits shown on your 2001 tax return. Use the same type of taxes and credits as shown on lines 2, 3, 5, 6, 7, and 8 of this Form 2210.

If you are filing a joint return for 2002, but you did not file a joint return for 2001, add the tax shown on your 2001 return to the tax shown on your spouse's 2001 return and enter the total on line 14 (figured as explained above). If you filed a joint return for 2001 but you are not filing a joint return for 2002, see Pub. 505 to figure your share of the 2001 tax to enter on line 14.

If you did not file a return for 2001 or your 2001 tax year was less than 12 months, do not complete line 14. Instead, enter the amount from line 11 on line 15. However, see Exceptions to the Penalty on page 1.

Part III - Short Method

Who Can Use the Short Method

You may use the short method only if:

• You made no estimated tax payments (or your only payments were withheld Federal income tax) or
• You paid estimated tax in equal amounts on your due dates.

Note:   If any payment was made earlier than the due date, you may use the short method, but using it may cause you to pay a larger penalty than the regular method. If the payment was only a few days early, the difference is likely to be small.

You may not use the short method if any of the following applies.

• You made any estimated tax payments late.
• You checked box 1b or 1c in Part I.
• You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U.S. income tax withholding.

If you can use the short method, complete lines 16-19 to figure your total underpayment for the year, and lines 20-22 to figure the penalty.

In certain circumstances, the IRS will waive all or part of the penalty if you have an underpayment on line 19. See Waiver of Penalty on page 1.

Line 17

If you are a household employer and made advance EIC payments, include those payments as estimated tax payments as of the date you paid the wages to your employees.

Part IV - Regular Method

Use the regular method if you are not eligible to use the short method.

Form 1040NR or 1040NR-EZ Filers

If you are filing Form 1040NR or 1040NR-EZ and did not receive wages as an employee subject to U.S. income tax withholding, the instructions for figuring your underpayment and penalty are modified as follows.

1. Skip column (a) in Part IV.
2. In column (b) of line 23 in Part IV, enter ½ of the amount on line 15 (unless you are using the annualized income installment method).
3. In column (b) of line 24 in Part IV, enter the total tax payments made through June 17, 2002, for the 2002 tax year. If you are treating Federal income tax (and excess social security or railroad retirement tax) as having been withheld evenly throughout the year, you are considered to have paid 1/3 of these amounts on each payment due date.
4. Skip all lines in column (b) that are shaded in column (a) in Part IV.

Section A - Figure Your Underpayment

Line 23

Enter on line 23, columns (a)-(d), the amount of your required installment for the due date shown in each column heading. For most taxpayers, this is ¼ of the required annual payment shown on line 15 of Part II. However, it may be to your benefit to figure your required installments by using the annualized income installment method. See the Schedule AI instructions beginning on page 4.

Line 24

Enter the estimated tax payments you made plus any withheld Federal income tax and excess social security and railroad retirement tax, for the 2002 tax year. If you are a household employer and made advance EIC payments, include those payments as estimated tax payments as of the date you paid the wages to your employees.

In column (a), enter the tax payments you made by April 15, 2002; in column (b), enter payments you made after April 15 through June 15, 2002; in column (c), enter payments you made after June 15 through September 15, 2002; and in column (d), enter payments you made after September 15, 2002, through January 15, 2003.

When figuring your payment dates and the amounts to enter on line 24 of each column, apply the following rules.

1. For withheld Federal income tax and excess social security or railroad retirement tax, you are considered to have paid ¼ of these amounts on each payment due date unless you can show otherwise.
   Note:   If you treat withholding as paid for estimated tax purposes when it was actually withheld, you must check the box on line 1c and complete and attach Form 2210 to your return.
2. Include in your estimated tax payments any overpayment of tax from your 2001 tax return that you elected to apply to your 2002 estimated tax. If you file your return by the due date (including extensions), treat the overpayment as a payment made on April 15, 2002.
3. If you file your return and pay the tax due by January 31, 2003, include on line 24, column (d), the amount of tax you pay with your tax return. In this case, you will not owe a penalty for the payment due by January 15, 2003.
4. If you paid estimated tax on June 16 or 17, 2002, it is considered paid on June 15, 2002, to the extent it is applied to the second required installment. If you paid estimated tax on September 16, 2002, it is considered paid on September 15, 2002, to the extent it is applied to the third required installment.

Line 30

If line 30 is zero for all payment periods, you do not owe a penalty. But if you checked box 1b, 1c, or 1d in Part I, you must file Form 2210 with your return.

In certain circumstances, the IRS will waive all or part of the penalty if you have an underpayment on line 30. See Waiver of Penalty on page 1.

Section B - Figure the Penalty

Read the following instructions and examples first before completing Section B.

Figure the penalty by applying the appropriate rate against each underpayment shown on line 30. The penalty is figured for the number of days that the underpayment remained unpaid.

The rates are established at various times throughout the year. For the period covered by the 2002 Form 2210, there were two rates in effect over two rate periods. If an underpayment remained unpaid for more than one rate period, the penalty on that underpayment will be figured using more than one rate period.

Use lines 32 and 34 to figure the number of days the underpayment remained unpaid. Use lines 33 and 35 to figure the actual penalty amount by applying the rate against the underpayment for the number of days it remained unpaid.

Your payments are applied to any underpayment balance on an earlier installment. It does not matter if you designate a payment for a later period. For example, you had an underpayment for the April 15 installment of $500. The June 15 installment required a payment of $1,200. On Monday, June 17, you made a payment of $1,200 to cover the June 15 installment. However, $500 of this payment is applied to the April 15 installment. The penalty for the April 15 installment is figured to June 17 (63 days). The amount applied to the June 15 installment is $700.

List your payments after 4/15/02.   Before figuring your penalty in Section B, it will be helpful to list the payments you made after April 15, 2002, as shown in the tables below.

Table 1
Payments after 4/15/02 through 12/31/02
Date	Payments

Table 2
Payments after 12/31/02 through 4/15/03
Date	Payments

In each table, list only the payments made during the dates shown in the table heading. Also, apply the following rules.

• Any withheld Federal income tax and excess social security or railroad retirement tax should be included. You are considered to have paid 1/ of these amounts on each payment due date unless you can show otherwise. For example, if you had Federal income tax withheld from your wages of $4,000 during the year, list $1,000 as paid on 6/15/02, 9/15/02, and 1/15/03 in the applicable table. Do not list the withholding attributable to the first payment due date (4/15/02).
• For Table 2, any balance due of income tax that you pay with your tax return is considered a payment for this purpose and should be listed. Use the date you file your return or 4/15/03, whichever is earlier, as the payment date.

Total days per rate period.   If an underpayment remained unpaid for an entire rate period, use the chart below to determine the number of days to enter in each column. The chart is organized in the same format as Form 2210, Part IV, Section B.

Chart of Total Days
Rate Period		(a)	(b)	(c)	(d)
1 (Line 32)		260	199	107	-
2 (Line 34)		105	105	105	90

For example, if you have an underpayment on line 30, column (a), but show no payments in Table 1, you would enter 260 on line 32, column (a).

The following line-by-line instructions apply only to column (a) of Section B. If there is an underpayment shown in column (b), (c), or (d) on line 30, complete lines 32 through 35 for those columns in a similar manner.

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